Peter Sands - Trevor P. Bond - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Technology Committee Catherine D. Rice - Chief Financial Officer and Managing Director.

Daniel P. Donlan - Ladenburg Thalmann & Co. Inc., Research Division Paul E. Adornato - BMO Capital Markets U.S. Nathan Crossett - Evercore Partners Inc., Research Division.

Good morning, everyone. And welcome to W.P. Carey's First Quarter 2014 Financial Results Conference call. [Operator Instructions] Please also note, today's event is being recorded. I would now like to turn the conference call over to Mr. Peter Sands, Director of Institutional Investor Relations. Sir, please go ahead..

Good morning, everyone. And thank you for joining us on this Conference Call to Review our First Quarter Results. Joining us today are Trevor Bond, President and Chief Executive Officer; and Katy Rice, Chief Financial Officer.

An online rebroadcast of this conference call will be made available in the Investor Relations section of our website at wpcarey.com, where it will be archived for 90 days. I would also like to remind you that some of the statements made on this call are not historic facts and may be deemed forward-looking statements.

Factors that could cause actual results to differ materially from W. P. Carey's expectations are provided in our SEC filings. Now I'll turn the call over to Trevor..

Thanks, Peter. Welcome, everyone on the line. We had a strong first quarter. And in a moment I'll turn the presentation over to Katy, who will walk us through the numbers in more detail. First, I'll discuss some of the quarter's highlights, the investment climate and our outlook for the rest of the year.

As we discussed on our last call, we closed our merger with CPA 16 at the end of January. And in connection with that, we issued close to 31 million shares. We believe most of that overhang has been absorbed based on the average daily trading volumes, which I've said are in a fairly consistent range.

Subsequent to the February earnings call, we issued $500 million worth of unsecured -- senior unsecured notes and paid off a portion of our secured indebtedness. So we are on track with the long-term goal of becoming mostly an unsecured borrower. Among other highlights are portfolio occupancy remains high at 98.3%, with a very diversified portfolio.

We had a robust quarter for both investment activity and fundraising on behalf of our managed REITs. And we're off to a strong start in 2014 on many fronts. Turning briefly to the financial highlights. First, we generated adjusted funds from operations over $118 million or $1.31 per diluted share.

And I want to emphasize that you shouldn't use this as a run rate for the year. We're maintaining our guidance at the levels discussed in prior calls. Katy will discuss that in a moment.

Clearly, the figure is higher than the one you'd arrive at by simply dividing the guidance by 4, primarily because investment volume has been faster than the pace we had initially expected to complete by this point in the year, which isn't in itself a real positive.

Another highlight of the quarter was the dividend repaid in the amount of $0.895 per share, raising our annualized rate to $3.58 per share. That represented our 52nd consecutive quarterly increase and exceeds the figure that we have said would be our minimum anticipated annual dividend following the merger.

Investment volume for the first quarter totaled $417.9 million. Of this amount, we structured $375 million of investments on behalf of the managed REITs. 44% of our total volume was in the U.S., 58% was in Europe. And by the total, I'm including that, the asset that purchased on behalf of W.P. Carey Inc.

If we include transactions that closed subsequent to March 31, our year-to-date investment volume is approximately $574 million. As I said, fundraising on behalf of our managed REITs was also strong. Gross offering proceeds for the first quarter totaled about $417 million.

This included $399 million on behalf of CPA:18, which brought that fund to being 75% subscribed. We also raised approximately $18 million on behalf of CWI as part of its $350 million follow-on offering. So we continue to have sufficient capital relative to the opportunities at that we're seeing. Turning to the outlook for the remainder of the year.

We're quite focused on executing our capital plan, which involves selling non-core properties and both paying down secured debt and reinvesting in new transactions. I should note that our definition of non-core is somewhat fluid. We regularly monitor the criticality of our properties to the operations of our tenants.

And in the event that over time we feel that our property has become less critical, and therefore that the likelihood of renewal decreases, we may begin to explore sale opportunities. Unless, of course, we also determine that holding the property and releasing it would be a better outcome, which is certainly the case some of the time.

So in this sense, our core properties are the ones that have the best residual risk profile, either based on likelihood of renewal or based upon fundamental real estate value. Currently, in many of our markets, it's been a good time to be a seller, and we have taken advantage of attractive pricing wherever possible.

During the first quarter, we disposed 9 properties, primarily in the U.S., for total proceeds of $128 million. Some of which we had acquired as part of our merger with CPA:16. And our transaction team continues to work on the existing disposition pipeline.

At the same time, based on our existing acquisition pipeline, we're more positive about the investing outlook than we were back in March. That's due to a number of factors. And we're comfortable that we can reinvest the capital plus the proceeds of future sales and properties that have longer lease terms and handover less residual risk.

In some cases, that will mean selling at cap rates that are higher than the cap rates at which for buying, which makes sense because we're making explicit tradeoffs; between yield and lease term, for example, or between properties that are less critical than those that will -- versus those that will be essential to tenants for years to come.

The goal here is obviously just to continually improve the quality of revenues and to reduce portfolio risk. And all of these factors are continually baked into our guidance. We also continue to proactively engage our tenants in lease extension negotiations. Year-to-date we've negotiated about 470,000 square feet of extensions.

In these transactions, the weighted average new rent was approximately 88% of then prevailing rent. For the remainder of 2014, we are 15 leases expiring representing approximately 1.8% of total annualized base rent, excluding operating properties.

In 2015, we have 33 leases expiring, representing approximately 8.3% of total annualized base rent; a large portion of which relates to Carrefour. As we've discussed before, Carrefour's one of the largest food retailers in the world. And as most of you know, they're among our top 10 tenants based on annualized base rent.

Specifically 12 of our Carrefour distribution facilities located throughout France, have leases expiring in 2015. As noted last quarter, we remain in an active dialogue with the company to finalize a plan for each asset, and we'll have more certainty soon.

Depending on the specific outcomes, we may dispose of some of the centers or possibly the whole portfolio. As matters progress over the coming months and quarters, we'll update you as appropriate. Turning now to the investment climate. As I just said, the U.S.

domestic net lease market remains competitive, particularly in the warehouse distribution segment. But the supply of opportunities does appear to be rising, perhaps because sellers are trying to lock in relatively low cap rates -- relatively lower cappers that is ahead of an expected rise in interest rates.

As a result, we expect cap rate compression to moderate within the more opportunistically price segments of the market in which we invest. And as I said in the last call, the landscape in northern Europe continues to be attractive from a buyer's perspective, and we're still finding good risk-adjusted returns there.

We still get, in most cases, leases that adjust upwards according to the local inflation indexes. CPI increases haven't been a big contributor to rental growth in recent years given the low inflation rate.

But if that increases in the future, as it is likely to do, we will benefit because 71% of our portfolio has rent increases that are tied to inflation. In any event, even if inflation remains low for some time, just having that inflation hedge endows the portfolio with significant intangible value, in our opinion.

The balance has of the portfolio does have fixed bumps [ph] that are averaging, actually, in excess of current inflation right now. I'd also looked that the European debt market is at a different point in its cycle.

The ECB has pursued its own version of unconventional monetary policy, different from the Fed that is, and therefore the dynamic that we've seen here in the U.S. with respect to the Fed tapering its quantitative easing program, has not had the same impact on bond markets in Europe.

As a result, rates are currently more attractive there, and we believe that having a presence there and a large flow of euro revenues, will enable us to tap into lower-cost unsecured debt now that we have received investment-grade ratings from both S&P and Moody's.

And with that, I'll now let Katy go into the results and the portfolio summary in more detail..

Thanks, Trevor. And good morning, everyone. I'll start by briefly reviewing our first quarter financial results and some key portfolio metrics, followed by an update on our balance sheet and capital structure. As you all know, our results this quarter are the first since we closed our merger with CPA:16 on January 31.

Accordingly, they reflect 2 months as a combined company. Next quarter will be the first quarter showing the full impact of the merger. We did, however, provide 2013 pro forma financial for the CPA:16 merger in the first quarter for comparative purposes.

As you may have already noticed, this quarter we've done some work to improve the layout and organization of our supplemental report and enhance the information provided. For example, in light of the recent bond issuance we've included information on our unencumbered pool of properties.

Over time, we intend to further evolve this document with the goal of providing greater transparency on our business -- businesses and their performance. And we have slightly revised our earnings release with some of the same goals in mind. Turning to our first quarter financial results, and starting with AFFO.

For the first quarter of 2014, we reported AFFO of $118.2 million, or $1.31 per diluted share, an increase of $40 million, or $0.19 per diluted share, compared to fourth quarter of 2013. This increase was driven primarily by 2 months of increased lease revenues as a result of closing our merger with CPA:16.

As Trevor mentioned, it was another robust quarter for acquisition volumes on behalf of the managed REITs and therefore structuring revenues were very strong, which is not typical this early in the year. Accordingly, it is important to note that we do not view our first quarter AFFO as a representative run rate for the remainder of the year.

We are maintaining our full year AFFO guidance of between $4.40 and $4.65 per diluted share. However, we do not expect it to be evenly divided among the 4 quarters given the lumpy nature of certain items such as structuring revenue, which is dependent on our acquisition volume.

Turning to our owned portfolio of real estate, at the end of the first quarter, our portfolio consisted of 700 net lease properties with approximately 83 million square feet leased to 230 different tenants and 4 operating properties. Approximately 68% of our annualized based rent comes from properties located in the U.S.

with the remainder coming from our international investments, primarily in Western and Northern Europe. Our portfolio occupancy rate was 98.3%, and our weighted average lease term was 8.7 years. Turning to the balance sheet and capitalization.

On prior calls, I've noted that over time we intend to migrate our balance sheet to primarily unsecured borrowing sources. During the first quarter, we took an important step towards that goal by successfully completing an inaugural $500 million senior unsecured note offering with a 10-year maturity, a 4.6% coupon and a 4.645% yield-to-maturity.

We're very pleased with the execution on our inaugural bond transaction and with the strong support we received from institutional investors. And now that we have successfully completed our inaugural issuance, we're excited about the flexibility that access to the unsecured markets will provide going forward.

We've continued to pay down mortgage debt and build our unencumbered pool of assets. During the first quarter, we prepaid $117 million of non-recourse mortgages and an additional $53 million through the end of April.

At March 31, our unencumbered pool of assets included properties of approximately $169 million of annualized base rent, which will continue to grow as we acquire assets and mortgages mature, providing strong support for any unsecured -- future unsecured debt issuance.

We view our debt maturities over the next few years as very manageable, and that we have ample liquidity.

Specifically, at the end of the first quarter, mortgage debt maturing through the end of 2016 ranges from approximately $182 million to $270 million per year compared to liquidity of over $1 billion, comprised of approximately $884 million remaining on our revolver and close to $200 million in cash or cash equivalents.

At quarter end, the weighted average cost of our non-recourse debt was 5.2% and our overall weighted average cost of debt including our senior unsecured notes and amounts outstanding under our credit facility was 4.8%.

At the end of the first quarter, our total equity market cap was approximately $6 billion, and we had an enterprise value of roughly $9.5 billion. Accordingly, at March 31, our net debt-to-enterprise value stood at 37.3% and total debt-to-gross assets was 43.9%. And with that, I will open it up for questions..

[Operator Instructions] And our first question comes from [indiscernible] from Capital One Securities..

Just could you kind of talk about the acquisition competitiveness in various geographies and product types and kind of where cap rates sit?.

Sure. As I had mentioned in my remarks, we are finding that the U.S. continues to see substantial flows of capital into the net lease space. Or, I should say, capital which remains in the space is looking for investment opportunities; and particularly in large portfolios we continue to see what we consider a portfolio of premium.

That said, in our more opportunistically priced segment of the market, those types of deals that require more due diligence and perhaps more structuring, we're finding that the supply of opportunities is increasing somewhat.

And as I mentioned, because I think sellers may be taking advantage of what they believe is a closing window to get a better deal.

In Europe -- and the reason that we've had more acquisitions in Europe this year is because it still is more attractive investing environment, and you have sellers who are reaching the same conclusion with respect to that window opportunity, perhaps. And also in some cases, more demand for capital, less access to debt.

So for a variety of reasons that continues to be strong market area.

In terms of property type, mostly what we're seeing is that the warehouse distribution-type space is still quite competitive because there are funds that are quasi-net lease funds, flash industrial funds that have targeted industrial and what we've seen is that they tend to focus on properties that have shorter lease duration because there's a higher yield that you can get with shorter lease duration, even though there may be exposure to step downs in rents after a few years.

But because of the desire for yield, there are there are some that are targeting that approach. And generally speaking, industrial has been a strong category, especially with the recovery of the economy.

So I would distinguish what we call -- what's typically called investor base and I'm referring to as Warehouse Distribution, I distinguish that from the Industrial category which is assets where things are actually made. And in that category, that's something that's always been somewhat of a specialty for us.

We think that opportunities there will broaden in the next few years, as the economy continues to recover..

And then just kind of more on the leasing side. For the lease maturities in '14 and '15, I know you kind of talk about this a little bit.

But you did touch on the split between leases with no options, first time options and those with renewals?.

I don't have that particular breakdown in front of me..

Okay, and then just last question for me.

Could you kind of talk about, kind of, the capital raising trends, kind of, on a month-to-month basis through the first quarter? And just how it's been general year-to-date for the managed REITs?.

Sure. We, as I mentioned in my remarks, we're about 75% subscribed in CPA:18, which for us is somewhat ahead of schedule. And so we're pleased with the progress. In fact, we're beginning to dial back on that a bit.

We'll be stopping the sale of what we refer to as the Class A shares which are the full commissions shares and shifting to just the sales of the Class C shares, which have a much lower initial load. And we're doing that quite consciously so that we can keep the equilibrium between funds raised and opportunities that we're seeing.

So that we're not limited in terms of capital by -- capital I should say won't limit our purchasing activity. We have ample capital dry powder in the managed funds. And I hope that answers that part of the question. With respect to CWI we've raised about $18 million this year, because we only recently kicked off the follow-on offering for that fund..

[Operator Instructions] Our next question comes Dan Donlan with Ladenburg Thalmann..

Trevor, was just curious if you -- when you say that you're 75% subscribed with CPA:18, what are you basing that 75% off of? How much equity you're looking to raise in that fund?.

That's the $1 billion -- $1 billion. So that would mean approximately $750 million..

Okay, okay.

So you're -- and you hope to -- and when do you -- I think you're closing the A Class share at the end of June, is that correct?.

Yes..

Okay.

And so if you're already closing 18, or if you're almost there with 18, are you planning on CPA 19? What can you offer us there?.

Well, it's a great question. We have no -- nothing filed now with the SEC and nothing on the works. I think that we like the optionality going forward of having the ability to delay the CPA:19 as long as we need to. We'll think more about that as we get to the end of the investment period for CPA:18.

We have a modest amount of capital still left in CPA:17, and so CPA:17 and CPA:18 are co-investing on some deals. And I think that from management's point of view, the risk of not having a CPA:19 tied up is not a problem because we can always shift deal flow toward W. P. Carey Inc. if we're ever in a period where we are out of the market.

And I think that would then further our goals of growing our balance sheet because the transactions that worked for the funds are clearly going to be very accretive for W.P. Carey Inc. And so it's something that has -- as we get closer to the end of the investment period for CPA:18, we'll be faced with that decision.

I'll also say that now that we focused -- we are focusing on creating new products silos for our investment management platform, the Hotel fund which has been successful to date is one example. We also have an active self-storage business as you know, which is folded into the CPAs, but we could have a separate fund for them.

And then we're always considering other product silos with capable experienced sponsors and other product types. And so I think that it's probably better for us to focus more on that type of new product, really, in the medium term, to enhance the value of our platform. And so that will continue to be one of our areas of focus..

Okay, a lot of interesting comments that have probably poised more questions. But just one clarity, the reason for slowing down the fund raise in the CPAs, because you raised it quicker than you expected and not necessarily that you think the investment climate is maybe not as attractive, such as when you slowed down capital raise in '05 and '07..

That's correct. I mean, inherent in the question is there's a caution that's inherent in the decision. And the reasons for the caution may partly stem with competitiveness in the investment environment and things like that. So I just think we have enough capital available to meet our goals.

And as I said, the downside of suddenly running out of CPA money is not that high, because we can shift to our balance sheet. So there's a lot of moving parts to that analysis..

Sure. Yes, I actually just heard that Annaly announced that they were going into triple net leases, so that's just another competitor. But I guess going back to the question, historically you guys have always done non-traded REITs, managed them yourself.

It sounds like you might be -- based upon your comments, you might be interested in maybe bringing another sponsor in that -- someone that might be have expertise in a particular sector that you guys do not? Or would you still if you raised funds you do it -- you wouldn't have a sponsor? Or any clarity there would be helpful..

Well, clearly, we want to maintain the quality control. I think that's been a hallmark of our approach from the beginning.

And whatever arrangement we struck with the potential sponsor would have to include the features that we're accustomed to with respect to quality control in terms of the investment process and things like that and maintaining the discipline.

That said, there are a number of very seasoned sophisticated investors in a wide variety of property types that have the ability to originate and execute transactions that we currently don't have the skill sets for. So the specific nature of the relationship would have to be determined.

We have a sub advisory agreement on our hotel fund with Watermark which is a seasoned -- Michael Medzigian is a very seasoned experienced hotel guy, and we have our Board of Directors which is comprised entirely of seasoned hotel veterans. And so we figure out ways to box the risk that are involved with bringing a new product on.

But we think that there is considerable interest in this particular type of distribution channel that we have and there are considerable barriers to entry to this particular line of business. And we want to get more value out of the platform, and so that is something that we we'll focus on.

But again, the first premise is that we held to be able to deliver good risk-adjusted returns to the investors in those funds..

Okay. And maybe shifting gears a little bit to the dispositions you did in the quarter. I was a little bit late getting on the call, I apologize.

Did you provide an aggregate cap rate for the $128 million that you sold?.

We did not..

No. It really is pretty variable depending upon where they're located, what asset type and, frankly, the amount of lease term that's remaining. Obviously, the assets that we're selling are usually things that we're de-risking the portfolio by selling. So oftentimes they may have higher cap rates than is typical..

So just for modeling purposes, from a GAAP -- on a GAAP basis maybe 8% or 9%? Or if you want to stay away, that's fine. I'm just curious..

Yes, I'd say this quarter, it was in the 8-ish percent range, on a weighted average basis..

And then on the G&A, Katy, what type of run rate should we assume there? I think the G&A came in a little bit lower than I was expecting. Not that my projections are accurate any -- all the time.

But could you give us some clarity on what you're kind of looking at for the rest of the year on a combined basis? Or if you want to separate stock comp versus cash that's fine as well?.

Yes. We have separated stock comp now. So that the G&A number, that is a pretty good run rate. Obviously, we've had some movement when we bought CPA:16, we do allocate a certain portion of our G&A to each of our managed funds. So that allocation obviously went away. But as 18 grows, obviously they'll get more of their fair share and CWI, as well.

And just to touch back on this quarter's AFFO, to your first discussion with Trevor about the acquisition volume, the biggest driver of the sort of larger than run rate quarter is -- was the high structuring revenue. This quarter was about $17 million. That's, as we've said in the past is a very lumpy number.

If you look historically, it sort of in the $6 million to $12 million a quarter range. So that was the driver. But in addition in the first quarter like many other companies, our stock comp plans have their vesting dates in February. So this can generate -- typically it generates a loss in our taxable REIT sub or a tax benefit.

This quarter, though, because the structuring revenue was so high, we effectively didn't have a benefit. So AFFO was even higher than sort of forecast because of that, so there's sort of a couple of facts. And then lastly, there are a few onetime items, like termination fees and deposits, that we're keeping for a variety of reasons.

So there were a few smaller 1x items that drove it up as well..

Just on that point.

How much did you have a least term and deposits?.

It was just under $1 million..

Okay, not too much then..

Not too much..

[Operator Instructions] We do have an additional question from Paul Adornato from BMO Capital Markets..

Sorry, I joined the call late, so if you mentioned this -- Trevor, I was wondering if you could comment on the distribution network and the consolidation that's happening at the independent broker dealer network level?.

Sure.

You mean, with respect the [indiscernible] and others that have been purchased, that roll-up?.

Correct.

And what's -- do you see an impact for distribution of your non-traded REIT products?.

Yes, that's a good question. No, we don't. We don't see any negative impact to that in our judgment because our biggest distributors were the Ameriprise and LPL, Commonwealth. So within their boardrooms, perhaps there is talk about the increased competition and the effects of consolidation and whatnot.

And it's a business that we're related to as you know as wholesalers. And so we view those particular distribution networks as like the grocery store. And so we compete for shelf space within those grocery stores. And as such, our shelf space is unaffected by these changes today.

We've had a few of the firms that were brought into that consolidation are disturbing our products but not to a significant or material degree, I would say..

And so I guess if you see like your direct competitors buying up the shelf space, does it -- would they have an incentive, therefore, to exclude your products or not? How do you see that shaping up perhaps?.

Well, I think, it's a very good question. And it really works both ways that if we're distributing through the grocery store owned by our competitor then I think we would stop distributing, whether they ask us to or not.

And again, because our -- these consolidations have not affected and we do not expect that they will affect the total flow of funds that we're getting, it's not a question that particularly concerns us right now. Also it's a very tricky challenging business onto itself, and we prefer the wholesale side of that business..

Our next question comes from Nathan Crossett from Evercore..

My question is on the dividend. You have a long track record of quarterly increases.

And I was just wondering how we should think about dividend growth? And if you were targeting a certain payout ratio?.

Yes, Nathan. As you saw from the first quarter, we raised our dividend to $0.895. So the run rate, the annualized run rate would be about $3.58. That's a big jump obviously from the CPA:16 merger. As you probably recall, what we guided people to on the merger were at the low end was $3.52. So we're above that at this point.

And I think our expectations are to maintain a fairly conservative payout ratio, very low this quarter because of the high AFFO per quarter that we had as that we've already discussed. So the payout ratio looks pretty low this quarter. But we're trying to pay out 100% of our taxable income.

We'll probably always have a slightly lower payout ratio just because of the taxable nature of a lot of our activities on the investment management side. But say in sort of summary, we got the bump on the dividend from the CPA:16 merger in the first quarter and we'll probably see more modest increases in the coming quarters this year..

And we have a follow-up question from Dan Donlan from Ladenburg Thalmann..

Just wanted to go back to the investment management side again.

Trevor, as you look at that sector going forward, how do you think about structuring future products? That the C Class share is fairly unique and that the upfront load is significant and lower but then it pays out over the term? Is that something that you're going to try to use on a going forward basis, given what may or may not happen within your legislation? And kind of what has been the reception to that C Class share from the FA community as well?.

It's a good question. Well, we -- clearly we developed that class of shares specifically in anticipation of potential changes that were occurring. And we're trying to stay -- we've been trying to stay ahead of the curve on that from the start. With respect to -- and I do believe that the rule will be adopted. I think it's just a question of when.

The planner [ph] is right now working on addressing industry concerns, and that -- we expect though that in the end it will be adopted. So we believe that class of shares will become more popular.

Although I should put quotation marks around the word "popular" because to get to the other part of your question, some FAs really won't like it, because it will involve earning lower revenues upfront, obviously, lower commissions.

But there's a large swap of the financial advisory community that really will appreciate it, and I think does appreciate it, because they see themselves as more like a registered investment advisers; in many case they actually are registered investment advisors, where a fee is earned on a portfolio basis -- year-to-year a lower fee but on the basis of assets instead of transactions.

So we think that it is a change that's good for the business. We're fully supportive of it. And we think we are well positioned to thrive in that new environment that's coming..

Some of the discussions we've had with FAs they like a recurring revenue stream. So I think you're probably right on that. And then just lastly, in terms of the valuation, I think that the market ascribes your investment management business, I think it's fairly low relative to probably what would be on a standalone basis.

I was just curious, #1, I don't think it makes much sense to ever break that out. But have you ever had the discussion? What's the thought process there? Should we always assume that the investment management business is a core part of W.P.

Carey as a REIT?.

I'm sorry, to clarify, did you say is a "poor"?.

No, core. Definitely core..

I was thinking like a poor cousin. It is core. And that said, we're constantly trying to refine the way we look at the business. It's a profit center, as is our core REIT business.

And so we are continually refining our cost allocation so that we can begin to present a clearer picture to the market as to exactly how profitable it is on a standalone basis.

And that in turn would begin to clarify our G&A load generally, so that you could allocate more clearly the REIT side and see where we stack up with REITs that don't have that investment management business. So from management's point of view, there's that question of better communicating the true EBITDA revenues and things and -- from the business.

And therefore, giving -- bringing clarity to the valuation question. Strategically, I think it's still -- we still consider it very valuable. As we've said in many different venues, it's a great way to grow revenues without issuing equity.

And -- but that said, we recognize that it adds a complexity to our business model which is not as appealing to rededicated investors. And so that's -- and because of that, it's likely that it is undervalued relative to what it might be if it was on a standalone basis.

So for now, I would say that it does afford us with tremendous advantages being able to look at other product types, we think there is room for growth there. And it's a good steady source of fee income. And that can help smooth out some cyclicality that we might experience.

So we like that part of the business but we're always looking at that, and what our strategy will be for it going forward. Because we think it is undervalued now..

And ladies and gentlemen, we've reached the end of today's question-and-answer session. And now we'll conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines..